Family Dollar Stores Inc. on Thursday said its board of directors has unanimously rejected the non-binding proposal made by Dollar General Corp. on the basis of what the company calls “antitrust regulatory considerations.” In addition, the Family Dollar board unanimously reaffirmed its recommendation in support of the merger agreement with Dollar Tree Inc. Read more about each proposal here (Dollar General) and here (Dollar Tree).
In negotiating the merger agreement with Dollar Tree, Family Dollar says its board ensured that the agreement permits the board, consistent with its fiduciary duties, to negotiate with, provide due diligence materials to and even terminate the merger agreement to enter into a new agreement with a competing bidder. However, as is customary, the board may commence negotiations and due diligence access only if, among other factors, the board determines that a proposal from a competing bidder is reasonably expected to lead to a superior proposal that “is reasonably likely to be completed on the terms proposed.” Family Dollar says its board, after consultation with its financial and legal advisors who have conducted an extensive antitrust analysis, determined that the Dollar General proposal fails to satisfy this requirement. The board’s decision follows the unanimous recommendation of a committee of four non-management independent directors that has been overseeing the company’s consideration and exploration of strategic alternatives since January 2014. This committee consists of Glenn A. Eisenberg, Ed Garden, George R. Mahoney Jr. and Harvey Morgan.
Howard R. Levine, chairman and CEO of Family Dollar, said, “Our board of directors, with the assistance of outside advisors and consultants, has been carefully analyzing the antitrust issues in a potential combination with Dollar General since the beginning of this year, as detailed in the company’s preliminary proxy statement that was filed by Dollar Tree with the SEC on Aug. 11. Our board reviewed, with our advisors, all aspects of Dollar General’s proposal and unanimously concluded that it is not reasonably likely to be completed on the terms proposed. Accordingly, our board rejects Dollar General’s proposal and reaffirms its support for the pending merger with Dollar Tree.
“I would also like to note that Dollar General’s letter, sent late last night, contained blatant mischaracterizations and did nothing to address the antitrust issues in Dollar General’s proposal,” he added.
Ed Garden, a co-founder and partner at Trian Fund Management, a large shareholder of the company, added, “Consistent with its fiduciary duties, the company’s board has sought to maximize shareholder value while considering the certainty of closing a transaction. The CEO of Dollar General said he believes that antitrust is not a risk but did not put forth a proposal that eliminates regulatory risk for Family Dollar shareholders. Given the significant antitrust issues involved with Dollar General’s proposal, we will not jeopardize the Dollar Tree deal for a transaction with Dollar General that has a high likelihood of not closing due to antitrust considerations. We remain fully committed to the Dollar Tree transaction.”
Prior to signing the merger agreement, Family Dollar reports its board, working with its advisors, engaged a number of times since February 2013 with Dollar General, referred to in the preliminary proxy statement as Company A. In January 2014, representatives of Dollar General postponed and then cancelled a scheduled meeting with Family Dollar and said they would be in touch in spring 2014. As further detailed in the preliminary proxy statement, the Family Dollar board, working with its advisors, initiated a strategic review in January 2014, which included an extensive antitrust analysis of a combination with Dollar General by the company’s outside legal advisors and an econometric consultant. Family Dollar says it contacted Dollar General on June 9, 2014, to request that the companies’ respective antitrust lawyers meet to discuss antitrust law perspectives on a Family Dollar/Dollar General business combination. Dollar General declined to schedule a discussion on antitrust issues. A meeting was scheduled between the parties on June 19, 2014. Prior to that meeting, a number of shareholders (including the company’s largest shareholder at the time) and analysts publicly stated that a sale of the company should or would occur imminently. At the June 19 meeting, representatives of Dollar General stated that they were not interested in pursuing a strategic transaction at that time, according to Family Dollar. At the time of the June 19 meeting, Family Dollar was bound by a customary non-disclosure agreement with Dollar Tree that prohibited disclosure of the existence of any discussions with Dollar Tree.
Glenn A. Eisenberg, chair of the committee of non-management independent directors overseeing Family Dollar’s consideration and exploration of strategic alternatives since January, said, “The directors have been diligent in their approach to the process that led up to the merger agreement with Dollar Tree and believe the Dollar Tree transaction offers substantial and certain value to our stockholders.”